Effective Planning for the Future of a Business Requires

question 13

Multiple Choice

Effective planning for the future of a business requires

• A)total sales revenue equal to equity invested times a factor of ten
• B)an understanding of the life cycle of the business
• C)the use of regional development plans for the business's market area
• D)connection with lenders

Understand the concept and calculation of the Degree of Operating Leverage (DOL).

Analyze the financial implications of changes in cost structures on project valuation.

Identify the factors influencing the option to wait or proceed with a project.

Comprehend the difference between soft and hard capital rationing and its impact on project financing.

---

Definitions:

Book Value

The value of an asset as it appears on a balance sheet, calculated as the cost of the asset minus any depreciation.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was put into use, reducing its book value on the balance sheet.

Disposed

Refers to the act of selling, transferring, or getting rid of an asset or property owned by an individual or company.

Gain

The increase in value of an asset or decrease in liabilities resulting in an increase in owners' equity, except those relating to contributions from owners.